4(1)The company’s qualifying expenditure on direct research and development is expenditure incurred by it where the following conditions are satisfied.
(2)The first condition is that the expenditure is incurred on research and development directly undertaken by the company.
[F1(3)The second condition is that the expenditure—
(a)is incurred on staffing costs,
(b)is incurred on [F2software or consumable items] , or
(c)is qualifying expenditure on externally provided workers.]
(4)The third condition is that the expenditure is attributable to relevant research and development in relation to the company.
(5)The fourth condition is that the expenditure is not of a capital nature.
(6)The fifth condition is that, if the expenditure is incurred in carrying on activities contracted out to the company, they are contracted out—
(a)by a large company, or
(b)by any person otherwise than in the course of a trade, profession or vocation the profits of which are chargeable to tax under Case I or II of Schedule D.
Textual Amendments
F1Sch. 12 para. 4(3) substituted (with effect in accordance with s. 168(3)(b) of the amending Act) by Finance Act 2003 (c. 14), Sch. 31 para. 10
F2Words in Sch. 12 substituted (with effect in accordance with s. 141(3)-(7) of the amending Act) by Finance Act 2004 (c. 12), s. 141(2)(b); S.I. 2005/123, art. 2